On this anniversary of the October 19, 1987 global stock market crash, the Dow and its cohort indexes are setting up a reversal of trend going into the rest of the fourth quarter of 2017, and maybe well beyond. The reversal has not yet triggered, and it may not anytime soon. But if it does, this new downtrend will likely present a shorting opportunity matched only by the buying opportunity ushered in by the March 2009 market lows. Only this time, we have a system to identify and trade it. And that my friends, will make all of the difference.
On Wednesday the Dow gapped up above 23,000 and has been able to hold that ground, closing Wednesday at 23,157.60. Today (Thursday) it gapped down at the Open and held serve, finding support at 23,050. This weekend I will be publishing an update on why holding above 23,000 is life support for this 8 year bull market and what 22,800 and then 22,400 mean for how aggressive we go Short.
Bold prediction; yes.
Bold consequences; to say the least.
Below is an excerpt and a key chart from the weekend update.
23,000: Why It's A Big, Big Deal
With the media heralding yet another round number milestone in the Dow, 23,000 sets itself apart as much more than just another round number step in a ladder to the sky. As the charts below illustrate, it is not exceeding 23,000 that is cause for excitement, it is the breaking down below 23,000 that will mark the breaking of the first level of bubble support, and as the channels and wave count below suggest, the first leaks in the breaking of the dam.
Two trend channels: (1) The Wave 5 channel up from January 2017; (2) The trend channel up from the most recent minor low from late August, 2017. Note 5 minor waves up from that low.
23,000: Where the minor wave channel gets broken;
22,798: Where a break of our trend-signal line triggers Short.
22,400: Where the Wave 5 channel from January gets broken.
My working hypothesis: With an extended overbought market and record levels of bullish sentiment, an easy break of the 23,000 level will lead to a quick break of the 22,798, then eventually 22,400. That last break will be confirmation of game over, an 8-year game over. Just 600 points below current levels; only one to three days of downside volatility.
More in the Weekend Update, due sometime Saturday, or Sunday at the latest.
Thursday's Trading Tables will be posted nearer today's market close.